The EURUSDextended the decline from earlier this week as the Organization for Economic Cooperation and Development talked up the risks surrounding the euro-area, and the exchange rate may weaken further over the remainder of the week as the fundamental outlook for the region turns increasingly bleak. Indeed, the OECD argued that the ‘firewall still needs to be further strengthened’ as the situation in Europe ‘remains fragile,’ and went onto say that the accommodative policy stance held by the European Central Bank ‘will be warranted for a considerable time to come’ as the region faces a risk for a prolonged recession.

At the same time, the Bank of Portugal warned of a larger contraction in 2012 as central bank officials expect to see a 3.4% decline in the growth rate, and the weakening outlook for the euro-area should continue to drive the exchange rate lower as European policy makers struggle to stem the risks surrounding the region. As the EU Summit comes into focus, there’s speculation that the group will expand the scope of the bailout fund to a whopping EUR 940B to stem the risk for contagion, but the developments coming out of the meeting may fail to prop up the euro should policy makers struggle to meet on common ground. As the EURUSD carves out a lower top going into April, we should see the exchange rate continue to give back the advance from earlier this month, and we may see the pair fall back towards 1.3000 in the days ahead as the outlook for the region deteriorates.

British Pound: U.K. Data Disappoints, Sideways Price Action Ahead

The British Pound pared the overnight advance to 1.5933 amid the slew of negative developments coming out of the U.K., and the GBPUSD may continue to give back the advance from earlier this month as market participants maintain bets for more quantitative easing. However, as the GBPUSD maintains the range carried over from the previous month, we should see 1.5600 provide near-term support, and the pair may continue to track sideways in April as market participants weigh the outlook for monetary policy. Although the Bank of England expects to see a stronger recovery in 2012, the slew of dismal data certainly points to a protracted recovery, and the Monetary Policy Committee may keep the door open to expand the Asset Purchase Facility beyond the GBP 325B target in an effort to balance the risks surrounding the region.

U.S. Dollar: Upward Trend To Gather Pace, Fed Rhetoric On Tap

The greenback regained its footing coming into the North American trade, with the Dow Jones-FXCM U.S. Dollar Index (Ticker: USDOLLAR)bouncing back from an overnight low of 9,941, and the reserve currency may push higher going into April as it maintains the upward trend from earlier this year. With Fed officials scheduled to speak later today, the central bank rhetoric is likely to heavily influence the dollar, and less dovish comments from Mr. Dennis Lockhart and Mr. Charles Plosser should increase the appeal of the USD as market participants scale back expectations for more quantitative easing.